How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lev Your Own Question
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
870116
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds


, It's regarding back in 2010 a s-corp took a 179

Customer Question

Customer: ***** *****
JA: Thanks. Can you give me any more details about your issue?
Customer: It's regarding back in 2010 a s-corp took a 179 deduction for truck for $11,500. The S corp is dissolving in 2016. what are the tax implications for just transferring to the shareholder. He is also 100% owner.
JA: OK got it. Last thing — JustAnswer charges a fee (generally around $32) to post your type of question to Tax Experts (you only pay if satisfied). There are a couple customers ahead of you. Are you willing to wait a bit?
Customer: Yes
JA: OK. Now I'm going to take you to a page to place a secure deposit with JustAnswer. Don't worry, this chat is saved. After that, we will finish helping you.
Submitted: 11 months ago.
Category: Tax
Expert:  Lev replied 11 months ago.

The distribution of the truck is reported as the sale at its fair market value.

Correspondingly - if the truck was fully depreciated - the basis would be zero and at amount will be attributed to the depreciation recapture and taxed as ordinary income.

In hands of the shareholder - that FMV would be the basis.

Customer: replied 11 months ago.
let' say the FMV is now 5500.00. How would the journal entry look like...the Debits and Credit.
If he sold it for 4000.00 before the business closed would he take a loss on the sale, and what would the journal entry be.
The books show the asset for 11,500, and accumulated depreciation for 11,500.00.
Expert:  Lev replied 11 months ago.

There is no loss because the truck is fully depreciated.
From tax prospective - when the asset is sold at $4000 the gain is $4000 and it is fully attributed to depreciation recapture.
So $4000 woudl be ordinary income.

Accounting entries example may be found here

http://www.accountingtools.com/questions-and-answers/how-do-i-record-the-disposal-of-assets.html

Expert:  Lev replied 11 months ago.

Cash - debit 4000
Accumulated depreciation - debit 11500
Gain on asset disposal - credit 4000
Assets - credit 11500

Customer: replied 11 months ago.
if he just transferred the Asset to himself. What would the journal entry look like?
Expert:  Lev replied 11 months ago.

There will not be any difference because from tax prospective the distribution is treated as the sale and the FMV is used as the selling price.

So - we woudl need to determine the FMV for reporting purposes.

The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.

    Customer: replied 11 months ago.
    But there would be no cash involved if he just transferred the asset to himself the shareholder, so what should the journal entry look like?
    Expert:  Lev replied 11 months ago.

    I would use cash account so - that would be a clear sale transaction on books and put some memo

    after that credit cash account and debit capital account.
    But if you do not wan to use cash - you may debit "retained earning" or capital account depending how your books are set

    and right after that record distribution.

    The closing entry will be against the Shareholder Capital Account.

    Expert:  Lev replied 11 months ago.

    I appreciate if you take a moment to rate the answer.

    Experts are ONLY credited when answers are rated positively.

    If you still have any doubts, need clarification - please be sure to ask.
    I am here to help you will all tax related issues.

    Related Tax Questions